HC Deb 19 July 1976 vol 915 cc1283-9
The Secretary of State for Industry (Mr. Eric G. Varley)

With permission, Mr. Speaker, I should like to make a statement about capital investment in the steel industry in Wales.

The Government have been faced with a very difficult and complex decision over the British Steel Corporation's proposals for major developments at Port Talbot and for the closure of steelmaking at Shotton. The corporation's plans and several alternative schemes have been most carefully examined in the light of the many representations made to us from the areas concerned. It is the Government's view that the assumptions about capital costs and market prospects which lay behind the corporation's proposals require a thorough re-examination in the light of inflation and of market prospects as the steel industry recovers from the severe recession of last year.

I have therefore asked the corporation to carry out a further review both of its own proposals and of alternative schemes involving continued steelmaking at Shotton, in the light of the latest available information. It has agreed to do so.

This review will inevitably take some time to conduct in the necessary depth and detail. We have therefore proposed to the corporation that it should undertake, without awaiting the review, those elements of its proposed investment at Port Talbot which would not prejudge in any way the decision on the future of steelmaking at Shotton.

The corporation has informed me that it is willing to proceed on this basis with the second phase of the coke oven replacement scheme, of which a first phase was authorised in February 1975. This will reduce pollution in the vicinity of the works and will contribute to operating efficiency. It is also prepared to consider the economic and operational feasibility of introducing some continuous casting to feed the existing mill at Port Talbot, giving some improvement in product quality. The new coke ovens and the continuous casting machine, together with necessary modifications to the steelmaking, scrap and slab handling facilities, would represent an investment of some £100 million in total.

The Government informed the corporation of our readiness immediately to authorise expenditure of a further £250 million for the proposed new hot strip mill at Port Talbot. The corporation has agreed to consider this proposal within the re-examination that it has undertaken to carry out.

Mr. Heseltine

Will the Secretary of State understand that his statement today is a classic example of Government ownership producing the worst of all worlds for British industry? How can the Secretary of State possibly justify a delay of two and a half years in pursuing a review which was political in its original conception and which throughout the period of its conduct has not produced a single fact to question the original decision taken by the previous Government?

Will the Secretary of State confirm that the cost figure in the original announcement in February 1973 about modernising the British steel industry through a 10-year programme, of £3 billion, is now estimated to be nearer £6 billion, and is increasing with every month that the Government delay that programme?

Will the Secretary of State agree that the critical decision which the British Steel Corporation wants is an announcement about the investment in industry to produce primary iron and steel, and that this announcement today largely avoids any decision in this direction?

Will the Secretary of State acknowledge that the arrangements that he has announced will bring dismay to the British Steel Corporation and to the customers in this country who depend on its supplies, and that they will bring satisfaction only to our overseas competitors, who once again see that Britain's competitive position is undermined by its own Government?

Mr. Varley

I am prepared to take lectures from most people about delays and interference concerning the British Steel Corporation, but not from Conservative spokesmen. When we examine the joint steering group of 1970—the hon. Gentleman was not directly associated with it, but some of his hon. Friends were—it is clear that the Conservatives have no reason to complain.

From our point of view, this thorough re-examination is necessary in the light of the worst recession that the steel industry has gone through for 40 years, and in the light of inflation and the market prospects. This in no way calls into question the overall development plans of the British Steel Corporation. We are keen to approve every item in the proposed Port Talbot development which does not necessarily prejudge the necessary decision about Shotton.

I never cease to be amazed when I see how easily the hon. Gentleman and some of his hon. Friends willingly contemplate, without much hesitation, the throwing on to the scrapheap of some 6,000 people.

Mr. Roy Hughes

If there is to be all this money available for investment in the steel industry, why is no iron-ore terminal being provided for the Llanwern works, the most modern in the country?

Further, when are the people who have mismanaged our nationalised industry for so long to be brought to book?

Mr. Varley

My hon. Friend's first question does not arise out of the statement, but I am prepared to have a look at the specific point raised by him. We want to see a competitive—and internationally competitive—British Steel Corporation, but it will take time to get to that position. If the British Steel Corporation had been allowed to go ahead with its original development programme, which was laid before the last Labour Government in 1969, instead of having the procrastination and delay which took place, associated with the hon. Member for Cirencester and Tewkesbury (Mr. Ridley), we should have been well down this road.

Sir A. Meyer

Is the Secretary of State aware that this non-decision will be interpreted at Shotton as a "thumbs down"? Is the Secretary of State further aware that Shotton now needs to know whether it has a bright future either as an integrated steel works or purely as a finishing works? What it needs above all is certainty. When will it get it?

Mr. Varley

I know what kind of certainty it would have had under the previous Government's decision. I know that when the White Paper was produced in 1973, the hon. Gentleman actually voted for the closure of steelmaking at Shotton. What I have said today justifies this further re-examination, so that we have the full facts before a final decision is made.

Mr. Cledwyn Hughes

Will my right hon. Friend totally disregard the callous reactions of the Opposition Front Bench, and bear in mind that the uncertainty of the last few months, the splendid record of steelmaking in Shotton, and the high unemployment in North Wales fully justify this review? Will my right hon. Friend tell the House when we are likely to get the result of the review?

Mr. Varley

My right hon. Friend is right. I have to disregard the reactions of the Opposition, which are wholly predictable on a matter of this kind, because they are not concerned with preserving any opportunities in that part of Wales. What we want is a thorough re-examination.

My right hon. Friend asked how long the further study will take. I have discussed it at some length with the British Steel Corporation. The corporation must have time to re-examine its plans and its market prospects thoroughly. It would be wrong to limit the period available for this work. We need the best possible information before a final decision is taken by the Government.

Mr. Peter Walker

Is the Secretary of State aware that, when, in February 1973, after 10 years of dithering by all Governments on steel investment, I gave the go-ahead to a modernisation programme and announced a programme of 38 million tons by the early 1980s, he condemned that programme as not being ambitious enough and went round the country talking about 48 million tons by the early 1980s? Is he aware also that, next year, as a result of two and a half years of dithering, we shall have 6 million tons less capacity than we would have had, so that, if there is an upturn in world trade, instead of benefiting our exports and enabling us not to have to import, we shall have an adverse feature of £520 million on our balance of payments?

Mr. Varley

There has not been two and a half years of dithering. The proposals which have been put to us were not put to us until January 1975. Then we had the further re-examination of those proposals. So the right hon. Gentleman is wrong about that.

I never went round the country talking about 48 million tons of steel. It is true that I talked about 43 million tons of additional steel. But the right hon. Gentleman is wrong to believe that the British Steel Corporation in the future may not want higher capacity than was envisaged under his scheme. In fact, the proposals by the corporation, which were put to us more than 12 months ago, envisaged a capacity build-up in Port Talbot of about 5.75 million tons, and he knows that there are other proposals which have been put forward by the Shotton work force for continued steelmaking there of 2.25 million tons, with an alternative scheme for 1.8 million tons. That is why we want the examination. We want to see whether it is possible for steelmaking to continue at Shotton.

Mr. Pardoe

Is the right hon. Gentleman aware that the swapping of accusations between the two sides of the House about whose interference in the management of steel has produced the greatest calamity is singularly futile? May we, therefore, look to the future and ask him some questions about it? In relation to Port Talbot, can he tell us the present value of production per man-hour worked there? What is the present capital productivity there? What return does he expect from the very large investment of public expenditure at Port Talbot which he has announced today?

Mr. Varley

I am afraid that I cannot answer those questions without specific notice because they are detailed matters. I shall see that the hon. Gentleman gets the information. What he has to bear in mind is that, as a result of today's announcement, a further £100 million investment will take place at Port Talbot. We were ready for another £250 million of investment to take place there on the new strip mill. But the corporation has told us that it would like us to consider that additional investment in the light of the review which we have asked it to undertake.

I shall see that the hon. Gentleman gets answers to his more detailed questions, as I say.

Several Hon. Members rose—

Mr. Speaker

I shall call two more questions. We have a great deal of business in front of us.

Mr. Kinnock

Is my right hon. Friend aware that there will be a certain welcome at Shotton amongst the workers there for this announcement which permits an opportunity for further representations to be made, bearing in mind that they have made representations with great expertise before, and at Port Talbot because, after a 21-month wait, it brings the first opportunity for the implementation of the changes which the workers there want, but that neither group nor the Welsh steel industry in general can be delighted—nor would my right hon. Friend expect it—by the announcement?

As one who does not think that Government interference in major decisions of this kind is the worst evil ever visited on the country, may I ask my right hon. Friend, for the sake of saving the Welsh steel industry and permitting the prosperous parts of it to expand and its workers to have security, what would be the Government's recommendation to the British Steel Corporation about the decision which it should reach to save steelmaking at Shotton and to permit Port Talbot to have the kind of future that it richly deserves?

Mr. Varley

The social consequences in Shotton were a factor which we had to take into account in considering this review. My hon. Friend is right. We are convinced that the changes which have taken place—certainly the very severe recession over the past 12 months and its impact on the corporation—fully justify this review. We are anxious to see the corporation's development programme go ahead and also to see that the investment goes ahead in Port Talbot. At Shotton, steelmaking and its future will arise out of this examination, and, if the corporation comes up with a recommendation that it can be preserved, we shall look at it very seriously.

Mr. Wyn Roberts

Is not this decision to cut back and to delay investment in steel in Wales clean contrary to the Government's declared policy and to what the Prime Minister was saying at Durham over the weekend about directing resources to the major industries? Is the Secretary of State aware that his indecision will be greeted with derision throughout the whole of Wales?

Mr. Varley

I do not know the extent to which the hon. Member for Conway (Mr. Roberts) speaks for Wales, but I know from my discussions with sonic of my hon. Friends who are concerned that this will be very welcome. The fact that we have allowed a further £100 million worth of development at Port Talbot and that we are on record as saying that another £250 million worth of investment could go ahead is fully in line with what my right hon. Friend the Prime Minister said over the weekend.